Using a Chapter 13 Bankruptcy Plan To Keep Your Home and Investment Properties For Much Less Than You Owe

bankruptcy petitionBy Omar J. Arcia, Esq.
Foreclosure Defense and Bankruptcy Protection Attorney


Most consumers are familiar with a simple Chapter 7 bankruptcy in which all of the debtor’s assets are liquidated and all unsecured debt, such as credit cards and medical bills are wiped out. Did you know that within a Chapter 7 your lender has the right to continue a foreclosure process on your home if you owe more than the market value of the home? Yet many consumers are unaware of the far reaching benefits of a Chapter 13 bankruptcy.  

Unlike a Chapter 7 bankruptcy, under a Chapter 13 a debtor restructures, instead of liquidating debts. A Chapter 13 debtor is able to repay over a period of 3-5 years all mortgage arrearages, late fees, escrow shortages, and even past due homeowner association (HOA) dues. Also, credit card and other unsecured debt can be negotiated down to about one percent (1%) of the amount owed, student loan payments may be reduced, IRS liens can be reduced or wiped out, car payments can be lowered or eliminated, and even attorneys’ fees are paid over time as part of the Chapter 13 plan. Perhaps the most beneficial part of a Chapter 13 plan is the ability to remove all second mortgages, lines of credit and other liens (including HOA liens) from your principal residence, and to significantly reduce principal balances on investment properties.

In order to qualify, the debtor must be employed, or have a regular source of income, and the amount owed on the first mortgage of your principal residence must be greater than the market value of that home. As it relates to the debtor’s investment properties, under a Chapter 13 plan you are able to wipe out any second mortgages or credit lines, and reduce the principal balance of the first mortgage on each property to the current fair market value, payable at a low fixed interest rate, amortized over 10-15 years, through an affordable monthly payment. Once a debtor submits a Chapter 13 plan and begins to make payments, the lender cannot proceed with a foreclosure.

If you owe more on your first mortgage than the fair market value of your home, have one or more additional mortgages, lines of credit or other liens on that property, and are currently employed, you may be a perfect candidate to file a Chapter 13 bankruptcy. If you also have investment properties which are upside down in value, and would like to keep them because they are generating rental income, a Chapter 13 bankruptcy is the ideal solution to resolve your mortgage crisis instead of wasting countless hours attempting to modify your loans directly with lenders.

More detailed explanations of different options available to homeowners in foreclosure, at risk of foreclosure, or considering bankruptcy are discussed in a new consumer bankruptcy seminar offered by the Arcia Law Firm in our area. Admission is free if you mention that you heard about the seminar through this magazine. Please contact the Arcia Law Firm at 954-437-9066 to make a reservation for the next seminar or to schedule your free consultation with an attorney. You may also visit for more information about the Firm, our staff and credentials, detailed articles, informative videos & testimonials, and to make your appointment online.


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